Senate Republicans on Tuesday proposed eliminating state income tax for everyone under the age of 30 and giving tax credits to businesses that create new jobs.
Any job qualifying for the tax credit must pay at least $10 an hour. The credit would be offered over a five-year period and would equal the annual wage of the job created.
Senate Republican President Jeff Lamberti, of Ankeny, said the tax credit would benefit businesses, big and small.
"If you create a job in Iowa under this plan you'll get a benefit," he said.
Senate Democratic Leader Mike Gronstal, D-Council Bluffs, said Democrats support borrowing money to continue business grants and loans through Iowa Values Fund program, but would not discount the tax credit approach.
"I appreciate the Republicans' concerns about bonding, but if they come up with a significant mechanism to deliver real dollars to economic growth, whether that's through tax credit real dollars or grant real dollars, we're certainly willing to take a look at that," he said.
The Republican plan to eliminate state income tax for people under 30 is aimed at keeping young workers in Iowa. Historically, young people have left the state for higher paying jobs and Republicans hope eliminating state income tax for those workers will reverse that trend.
"That's a huge incentive," said Senate Republican leader Stewart Iverson, of Dows.
Gronstal questioned whether such a plan would be legal.
"I think there's probably a constitutional problem with two guys working the same line at the same factory and one of them is tax free the other has to pay state income tax," he said. "There's probably an equal protection constitutional problem with that."
In addition, Gronstal estimated the tax break would cost the state at least $250 million, which he said could drain money from important state programs.
Lamberti and Iverson said they had not yet done a detailed financial analysis of their plan.
House Speaker Christopher Rants, R-Sioux City, said the ideas are worth exploring, but he wanted to see the costs.
He said he was uncertain whether the under-30 tax break would discourage young people from leaving.
"There needs to be some discussion really about what is it that's driving a 20-year-old. Is it the job or the taxes," he said. "What they are looking for as they are leaving college is it a job, is it straight up wages, is it other types of amenities? I think we need to look at all of those."
The Senate Republican plan also would commit at least $25 million a year for construction of new buildings or renovation of existing ones for businesses. It also increases funding for a program designed to enhance the quality of life in Iowa communities from $12 million to $25 million a year over five years.
Lamberti said the plan is better than ones that would borrow millions of dollars for business grants or loans.
"We don't need government being in the business of handing out money ... picking winners and losers," Lamberti said.